The Disruption Narrative Is Due For Disruption

The story is business and market transformation, not disruption for disruption’s sake

If ever there was a Valley cliché overdue for retirement, it’s our cherished narrative around “disruption.” You know the story: Well funded Startup is attacking this or that Huge Market where Big Dumb Incumbent is failing to Innovate. Our hero the Startup, being far more nimble, efficient, and tech savvy, is Destined to Eat the Incumbent’s Lunch.

We tell ourselves this story over and over, because the tale soothes our midnight apprehensions that maybe we’re missing something. Which, after months of Shift Forum prep with leaders of innovative companies large and small, I am convinced we most certainly are.

Let’s take the story apart by its core elements. First, the Startup. The most interesting startups aren’t focused on disruption. They’re focused on finding a better way through a market, system, or product category. Their goal is not to eat an incumbent’s lunch. Instead, they’re trying to rethink how a market should work. The best startups aren’t disrupting, they’re reimagining. Insofar as disruption occurs, it’s a byproduct, not a goal.

A few examples: Honor represents a new approach to provision of home care services for the elderly. While it’s easy to assume Honor is disrupting old line elder care giants, the truth is, Honor is trying to create an entirely new, double-sided market that rethinks how elder care is delivered. Sure, it’s disruptive, but it’s far more: It’s transformative. Another example is Earnest, a fast-growing fintech startup that on first blush also fits into the standard “disruptor” model. Earnest offers loans at better rates and with better outcomes than its massive incumbent competitors. But look behind the curtains of how Earnest is rethinking the trillion-dollar debt markets, and you’ll find those same incumbents are deep in bed with the startup, buying their loans and profiting from Earnest’s innovation (this is also true for other fintech darlings like SoFi).

Now let’s examine some of the “Big Dumb Incumbents” in the markets where startups are focusing. Assuming these large companies are ignorant or incapable of response is naive. The leaders of the world’s largest companies are deeply aware of the shifts occurring in their markets — they have excellent signals of those shifts in their pricing, sales, and supply chain metrics. And they’re not sitting on their hands. They’re acting, and in many cases, those actions take the form of acquiring and/or partnering with innovative startups.

A few examples of that action: Consumer packaged goods giant Unilever, correctly sensing a shift from a retail model of distribution to a direct-to-consumer model, acquired Dollar Shave Club last year for a cool $1 billion. Verizon, once a simple “carrier”, has in the past five years transformed itself into a major media and information services player, and now stands as perhaps the most viable alternative to the Google-Facebook duopoly in digital media. Vying for that title is Comcast, once seen as the ultimate “dumb pipe” company. And Walmart, the most visible victim of Amazon’s digital disruption, has responded by acquiring more than 20 digital startups, the most recent (Jet.com) being the largest and potentially its most important. More massive companies deep in the process of fundamentally transforming their companies include Citi, J&J, Nasdaq, Aetna, Bank of America, Schwab, andMicrosoft. C-suite executives from each of these companies will also all be speaking at Shift (to see who, click on any of the bolded links).

Companies old and new are faced with the same markets, the same consumers, and the same technologies. Innovation accelerates when they learn from each other, partner with other, and of course, compete with each other. But disrupt each other? That’s so ten years ago.

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If you’re as eager to join this conversation as we are to convene it, please join us at the Shift Forum this February 6–8th in San Francisco. We’ve got a very limited number of seats left, and we expect it to sell out shortly. Because the event is held under Chatham House Rule, you’ll have be present to learn from these extraordinary leaders. Non profit and founder discounts are available. We hope to see you there!